People are living longer, so their retirement nest eggs have to last much longer. / Thinkstock

by Rodney Brooks, USA TODAY

by Rodney Brooks, USA TODAY

In the good old days, retirement was pretty simple. You worked 30 years. Got a pension. And put your money in bonds to make it last.

But this isn't your father's retirement. Back then, life expectancy was such that people only spent less than a decade in retirement.

Today is different. Boy, is it different!

After working for 30 years, it's not out of the question to spend another 30 years in retirement. And that, for lots of people, is the big worry.

People getting ready for retirement are worried that they won't be able to save enough to last. And people already in retirement worry they will outlive their nest eggs.

In a poll by BlackRock more than half of those surveyed were worried about outliving their savings.

"People are living longer than ever before, dramatically altering the financial challenges in retirement," said Rob Kapito, BlackRock president. "Increased longevity is a blessing, but it's an expensive one, because that translates into the need for a bigger retirement nest egg and access to secure retirement-long income."

One key, financial planners say, is to set a budget in retirement, as you do in your working life. But it's even more important to stick to that budget in retirement since you're living on a fixed amount of money.

Stuart Ritter, vice president of T. Rowe Price Investment Services, says that early in retirement is usually hardest for people to stay on budget. They can start out with their 401(k) or pension in a lump sum, and for most, it's the most money they have ever had in their lives.

"The issue is that the money has to last for 30 years," he says. "That's why we encourage people to think of it more in terms of income (stream), and not as a balance. It can give you a more realistic understanding of what your spending can be like."

Ritter says two key things determine how long your money lasts: how much you save before you retire and how much you spend after retirement.

"The other thing that substantially affects their ability to make their money last is when they actually retire - how long they work," Ritter says. "For those folks, one of the best things they can do to improve their life during retirement is delay (retirement). If working two or three years more means a higher degree of confidence for 30 years in retirement, it may be worth it."

Dana Anspach, founder of Sensible Money in Scottsdale, Ariz., and author of Control Your Retirement Destiny, says she uses three criteria to determine if a client is at risk for running out of money in retirement.

First is the length of retirement. If the client is young and healthy, they should prepare for a longer retirement. Second, she looks at if a client has the discipline to stick to a plan. "Whatever the plan is," she said, "If you can't stick with the plan, you are at greater risk." And third, she says, she looks at the ability to stay on a budget.

"You have to be able to know what you are going to spend," she says. "You can't be wildly off. You have to stick with a disciplined plan and you have to account for the potential length of your retirement, particularly if you are looking to retire early."

STRATEGIES TO MAKE THAT MONEY LAST

All the financial planners say sticking to that budget is key. But if it's clear that the nest egg will not last through retirement, there are other strategies, like working longer, taking Social Security later or even working a part-time job.

Anspach says people often forget to build key expenses into their budgets, things like dental care and eye care. And one of the biggest problems for retirees trying to stay on budget, she says: adult children, whether it's having to help them out after losing a job or getting a divorce.

And when a client is spending too much: "All we can do is say here are your choices," she says. "You have to get your spending down to this level or you will run out of money. If a client wants to take more money out, I can't say no. All I can do is warn them."

And as a last resort, she says, she will recommend use of a reverse mortgage or downsizing. "I prefer to not use it as part of their plan," she says. "I use it as a reserve strategy. We need some kind of plan B. Maybe it's moving in with your sister."

Ross Badger, director at Satis Asset Management in London, says retirees must make sure they scrutinize all their expenses.

"There is often a significant savings to be made," he says. "People need to look at utility companies and subscriptions. Review those. Look at payments that automatically go out - insurance premiums. Many times they haven't reviewed it. When we do a detailed review of each expenditure, it's amazing when you hear that people didn't even know that was still coming out. It's also amazing how many people don't check their bank statements."

Badger says people in all income groups worry about their money lasting through retirement. But what amazes him is that they have done so little to work out the numbers.

Also, he says, watch the debt. "Despite interest rates being historically low, there is a lot of encouragement to increase the level of debt, buy bigger houses, take holidays," he says. "Keep the debt level manageable. Even when you think you can afford to pay the mortgage payments or loan payment, test what it would do to your finances if interest rates were to increase or double."

And finally, there's inflation to consider. It's a big concern, and it should be, Ritter says. And that's why it's important to make sure you continue to have stocks in your portfolio in retirement, he says.

"Years ago, they could put all their money in bonds," Ritter says. "Rates were higher. People died after seven or eight years (in retirement). Inflation didn't have much time to increase the price of things they wanted to buy. Now we tell people to plan for 30 years of inflation.

"Inflation at 3% will double the rate of everything you buy in 23 years," he says. "To buy that same dinner out or buy that same cruise ticket or airline ticket. If it takes $40,000 for your lifestyle this year, it will take $80,000 (in 23 years). If your portfolio hasn't been growing, you won't have enough money in there to take out twice as much."

Here's the key to gaining confidence in your long-term savings: "Adjust as you go along," Ritter says. "Expect to have to adjust. Start with a plan. Start with guidance to know where you are going. That gives people confidence to enjoy retirement and confidence that they will have a plan in place to help manage. And they can concentrate on more fun things."